The Pre-Career Years John Maynard Keynes – 1883 to 1905

Date

Event

5 June 1883

John Maynard Keynes is born at his parents’ home – 6 Harvey Road, Cambridge. He is born into comfortable circumstances, into a household staffed with domestic servants.

His father, John Neville Keynes, is an Economics lecturer at Cambridge University. His mother, one of the first female graduates of Cambridge University, is active in charitable works for less-privileged people. She will later serve as mayor of the city.

His parents, who ultimately survived him, lived at 6 Harvey Road throughout Keynes’s life.

1888

A four and a half year old Keynes is asked what interest is and replies: “If I let you have a halfpenny and you kept it for a very long time, you would have to give me back that halfpenny and another too.”

1890

Keynes attends the Perse School Kindergarten while receiving elementary educational instruction at home.

1892

Keynes becomes a pupil at St Faith’s preparatory school. He attends as a day boy (a non-boarder). His academic performance is uneven. He is recognised to be quick at arithmetic and algebra. His large vocabulary is also noted. He is criticised for carelessness.

1893

Keynes’s father writes in his diary that St Faith’s is driving Keynes too hard. There are lengthy sickness absences from school – Keynes’s constitution seems to be rather frail.

June 1894

Keynes is now top of his class at school.

December 1894

A mathematics teacher comments that Keynes, “does really brilliant work” but that he “soon tires and has not perseverance in the face of difficulty.”

Late 1896

St Faith’s headmaster writes that Maynard is “head and shoulders above all the other boys in the school.” He is confident that Keynes could get a scholarship to Eton.

Early 1897

Keynes is preparing for Eton’s scholarship exam, beginning work at 7 a.m. each day – the same starting time as the Eton exam.

July 5 1897

Three days of examinations for Eton begin.

July 12 1897

Twenty scholarships for Eton are awarded. Keynes ranks tenth out of twenty overall, and first in mathematics.

September 25 1897

Keynes begins at Eton three days late, following a fever. Keynes is taller than his classmates, his voice has broken and he is intellectually self-confident. His classmates look to him for leadership – he is a natural leader.

December 1897

At the end of his first term at Eton, Keynes places first in classics and second in mathematics.

Early 1898

Ill-health strikes in Keynes’s second term at Eton, including a bout of measles. There are frequent absences from classes.

Mid 1898

Keynes wins Eton’s Junior Mathematical Prize.

1899

Keynes scores full marks for his essay ‘Responsibilities of Empire’. His examination results are considered outstanding – 1,156 out of 1,400.

A teacher writes of him, “in his work there is absolutely nothing of the mercenary, mark-getting feeling… He takes a real interest in anything which it is worthwhile to be interested in.”

Keynes tops the select list in the Senior Mathematical Prize.

4 February 1900

The new century sees Britain engaged in the Boer War. Keynes does not join the “Eton Shooters” for military training. He writes to his father, “Some say that patriotism requires one to join the useless Eton shooters, but it seems to me to be the sort of patriotism that requires one to wave the Union Jack.”

Mid 1900

Eton’s Senior Mathematical Prize is won by Keynes.

25 November 1900

Keynes competes for and wins the Richards English Essay Prize.

26 January 1901

Keynes is elected to the College Pop – Eton’s prestigious debating society.

Keynes wins the Chamberlayne Prize, worth £60 a year for four years, by placing first in the Higher Certificate Examination. He placed first in mathematics and history and first for English essay.

1902

A teacher at Eton, Geoffrey Young, later wrote of Keynes, “His reading had been immense, his selection was admirable, and wit and some well-calculated indiscretions illuminated an astonishingly mature performance. We were listening to something much beyond the range of the normal clever sixth-form boy…”

October 1902

John Maynard Keynes begins at King’s College, Cambridge as an undergraduate.

He spends most evenings engaged in social activities, ending each night in endless intellectual arguments with his friends, going to bed at about 3 a.m.

In his first year at university, he joins or is invited to join several highly prestigious debating and intellectual societies. Throughout his undergraduate years Keynes is a frequent speaker at the Union – Cambridge’s renowned debating society.

His intellectual and social activities will shape Keynes’s development more than his formal studies will.

Although he is an intellectual, Keynes does not abandon sport. He wins a cup when his boat wins in the Trail Eights. He plays tennis and golf and is fond of horse riding.

May 1904

Keynes is elected Secretary of the Union, which will lead to his becoming President. He is also elected President of the University Liberal Club. He is awarded a first class in mathematics from King’s College.

1904 – 1905

Keynes prepares for Cambridge’s Tripos examinations in mathematics while continuing to pursue his other intellectual interests.

June 1905

In the Tripos list, Keynes is ranked in twelfth place, a highly creditable result. For Keynes, however, while some offered congratulations, others offered condolences.

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The Budding Economist John Maynard Keynes – 1905 to 1913

Date

Event

Summer 1905

Keynes spends summer enjoying a mountain climbing holiday in Switzerland and with his family. He also does some serious reading – Marshall’s Principles of Economics.

Autumn 1905

Keynes returns to Cambridge to attend economics lectures by Marshall, the author of his summer time reading. Marshall writes to Keynes’s father:

“Your son is doing excellent work in Economics. I have told him that I should be greatly delighted if he should decide on the career of a professional economist.”

Keynes writes to Strachey: “I find Economics increasingly satisfactory, and I think I am rather good at it. I want to manage a railway or organise a Trust, or at least swindle the investing public.”

February 1906

In one of his frequent letters to his friend G.L. Strachey Keynes writes, “I am studying Ethics for my Civil Service.” (Keynes is preparing for the Civil Service entrance examinations.)

August 1906

Keynes sits the Civil Service examinations in London between 3 August and 25 August.

October 1906

The results of his civil service exams infuriate Keynes. He writes to Strachey:

“I have done worst in the only two subjects of which I possessed a solid knowledge – Mathematics and Economics. I scored more marks for English History than for Mathematics – is it credible? For Economics I got a relatively low percentage and was eight or ninth in order of merit – whereas I knew the whole of both papers in a really elaborate way. On the other hand, in Political Science, to which I devoted less than a fortnight in all, I was easily first of everybody. I was also first in Logic and Psychology and in Essay.”

He was later to say: “I evidently knew more about Economics than my examiners.”

Late 1906

Keynes is offered and accepts a position in London with the civil service, working in the India Office. He will work there for the next two years while probing probability theory in his spare time. Much of this “spare time” seems to occur at work where he says, “I have not averaged an hour’s office work a day this week so that I am well up to date with the (probability) dissertation.”

April 1907

Keynes is now working hard in the Revenue, Statistics and Commerce Department of the India Office, which he enjoys. He writes, “I really believe that I have written almost every despatch in the Department this week.”

September 1907

“I’m thoroughly sick of this place and would like to resign. Now the novelty has worn off I’m bored nine-tenths of the time and rather unreasonably irritated the other tenth whenever I can’t have my own way,” Keynes writes.

October 1907

Hoping to obtain a fellowship at King’s College, Keynes spends a fortnight in Cambridge working on his probability dissertation. He fails to obtain a fellowship.

June 1908

Keynes resigns from the India office to work on probability theory in Cambridge. He will receive £100 each year from his father and the same amount, paid privately, from Pigou, the chair of Economics at Cambridge.

19 January 1909

Keynes begins lecturing at Cambridge University three times a week on Money, Credit and Prices.

2 February 1909

In a letter to his friend, Duncan Grant, Keynes writes, “I have received today the offer of an appointment – to be representative of H.M.’s Government on the Permanent International Commission for Agriculture at Rome. Salary £500 increasing; duties practically nil. Shall I accept?

March 1909

On the basis of his dissertation in Probability, Keynes is elected a Fellow of King’s College – adding £120 per annum to his income.

Spring 1909

The Economist publishes a series of letters from Keynes arguing that estimates of British investments in India are exaggerated.

May 1909

Keynes wins the Adam Smith Prize (£60) for an essay on Index numbers.

15 October 1909

“I seem to spend most of my time seeing pupils. I have already got eighteen of these, which will be rather hard work, but ought to bring in nearly £60.”

7 November 1909

Keynes reports to his father that his income has reached £700 per annum, including the money his father gives him.

January 1910

In the General Election campaign Keynes travels to Birmingham for five days to support his old friend Edward Hilton Young who is standing for East Worcester as a Liberal.

September 1911

After a tour of Ireland with Liberal politicians, Keynes writes to Duncan Grant, “You have not, I suppose, ever mixed with politicians at close quarters. They are awful… their stupidity is inhuman… The rest of them had minds and opinions as deplorable as their characters.”

Autumn 1911

Keynes becomes the editor of the Economics Journal – a considerable honour.

Autumn 1912

Keynes is elected to ‘the council’ the body that governs King’s College. He was elected the previous year to the Estates Committee and now has motions attacking the amount of cash held by the college and querying the running of the college carried. His motion calling for a pay increase for College Fellows is defeated.

Early 1913

Keynes completes his first major work on Economics – Indian Currency and Finance. He persuades MacMillan, his publisher, to share profits from this and other books 50/50. (By 1942 4,900 copies have sold, netting Keynes £295.)

3 April 1913

Before his book is published, Keynes is offered and accepts a seat on a Royal Commission to enquire into Indian Finance and Currency.

12 August 1913

Austen Chamberlain writes to Keynes, “You will certainly be considered the author of the Commission’s report… I am amazed to see how largely the views of the Commission… are a mere repetition of the arguments and conclusions to which your study had previously led you.”

The War and its Immediate Aftermath John Maynard Keynes – 1914 to 1919

Date

Event

August 1914

World War 1 Begins

Chancellor of the Exchequer David Lloyd George reads a memorandum written by Keynes urging resistance to demands being made by bankers for the creation of new assets and suspension of liabilities.

Basil Blackett, working in the Treasury, writes in his diary, “Lloyd George has at last come down on the right side… He has clearly imbibed much of Keynes’s memorandum and is strong against suspension of specie payments…”

November 1914

News of the deaths at the front of friends and undergraduates comes to Keynes who is back at work in Cambridge.

He writes to G.L. Strachey, “I am absolutely and completely desolated. It is utterly unbearable to see day by day the youths going away, first to boredom and discomfort, and then to slaughter.”

In April 1915, he writes to Duncan Grant, “It is horrible, a nightmare to be stopt anyhow. May no other generation live under the cloud we live under.”

January 1915

Keynes joins the Treasury to assist Sir George Paish, whose role is to provide advice to David Lloyd George independent of that given by civil service officials.

Soon after his appointment, Keynes is asked by Lloyd George to comment on Lloyd George’s views on the state of affairs in France. Keynes replies, “With the utmost respect, I must, if asked for my opinion, tell you that I regard your account as rubbish.”

May 1915

Reginald McKenna replaces Lloyd George as Chancellor of the Exchequer. Keynes’s role at the Treasury is formalised and he joins No. 1 Division, which deals with finance. Following this, he makes rapid progress in the Treasury.

Sir Otto Niemeyer and Sir Richard Hopkins wrote later:

“His quick mind and inexhaustible capacity for work rapidly marked out a kingdom for itself, and, before long he was a leading authority on all questions of external, and particularly inter-allied finance… It was Keynes who developed and applied the system of allied war loans… When America came into the war, the American Treasury found the system fully fledged and itself adopted a similar practice.

26 March 1916

Despite the war, Keynes – who is now based in London while working for the Treasury – continues to lead an active social life. He writes to his mother:

“I have been leading such a giddy life lately that there has been no time to write letters – only two evenings in the last fortnight when I haven’t dined out.”

Early 1917

Keynes’s takes authority for Treasury ‘A’ Division, carved out of No. 1. Division. He is now in the key position at the centre of the inter-allied economic effort. His success in this role is universally acclaimed. This is as high as Keynes will rise in a formal administrative role in Government.

30 March 1917

In a letter to his mother, Keynes writes, in support of the Russian Revolution:

“I was immensely cheered and excited by the Russian news. It’s the sole result of the war so far worth having… I see not the remotest chance, however, of any pro-Tsar counter-revolution…”

6 May 1917

In another letter to his mother, Keynes writes:

“Work has not been overwhelmingly heavy and the negotiations with the U.S., which occupy a good deal of my time, are going extremely well. If all happens as we wish, the Yanks ought to relieve me of some of the most troublesome of my work for the future. Relations with Russia, on the other hand are not what they should be. That’s a piece of diplomacy over which we have blundered hopelessly, with our ridiculous tears for the Tsar and the rest of it.”

24 December 1917

Keynes writes to his mother – again in a pro-Russian revolution, anti-British establishment tone:

“My Christmas thoughts are that a further prolongation of the war, with the turn things have taken, probably means the disappearance of the social order we have known hitherto. With some regrets I think I am not on the whole sorry. The abolition of the rich will be rather a comfort and serve them right anyhow. What frightens me more is the prospect of general impoverishment. In another year’s time we shall have forfeited the claim we had staked out in the New World and in exchange this country will be mortgaged to America.

“Well the only course open to me is to be buoyantly bolshevik; and as I lie in bed this morning I reflect with a good deal of satisfaction that, because our rulers are as incompetent as they are mad and wicked, one particular era of a particular kind of civilization is very nearly over.”

October 1918

Keynes and his future wife Lydia Lopokova are guests (independently of one another) at a party to celebrate the Russian Ballet in London.

Autumn 1918

Victory over Germany seems close. Keynes and ‘A’ Division begin to look in earnest at reparations – the financial compensation Germany should pay other countries for the war.

Looking at the performance of the German economy they conclude that Germany might possibly be able to pay £3,000 million, but £2,000 million is a more likely figure.

Charging £2,000 million at 5 percent interest would lead to annual interest payments of £100 million from Germany.

Meanwhile, an independent committee estimates the full cost of the war at £24,000 million and, at 5 percent of this sum, they conclude Germany should pay £1,200 million per year until the capital is paid off. (By way of contrast, to see how huge a sum this was, in 1931 Britain claimed it was economically impossible to pay off just £35 million per year to the U.S.)

11 November 1918

The war ends with an armistice.

January 1919

No food gets into Germany for four months – against the terms of the Armistice. The Germans must pay for food in gold but the French are blocking this – they want the gold as part of German reparations. British troops are sickened by the sight of sick and hungry children.

14 May 1919

Keynes writes: “I have been as miserable for the last two or three weeks as a fellow could be. The Peace is outrageous… Meanwhile there is no food or employment anywhere, and the French and Italians are pouring munitions into Central Europe to arm everyone against everyone else.”

“Lunch with Maynard Keynes… Keynes is very pessimistic about the German Treaty. He considers it not only immoral but incompetent.”

AND

“…Keynes has been too splendid about the Austrian Treaty. He is going to fight. He says he will resign.”

5 June 1919

Keynes writes to Prime Minister David Lloyd George:

“I ought to let you know that on Saturday I am slipping away from this scene of nightmare. I can do no more good here. I’ve gone on hoping even through these last dreadful weeks that you’d find some way to make of the Treaty a just and expedient document. But now it’s apparently too late. The battle is lost.”

Keynes seeks to have a wider influence on public opinion than a return to his pre-war life lecturing in Cambridge will allow him. He informs the University he will lecture once weekly on ‘The Economic Aspects of the Peace Treaty’. He also requests an involvement in King’s College’s finances.

June 1919

Acting on the advice of friends, Keynes turns down £2,000 per annum (10 to 20 times his academic remuneration) for one day’s work per week acting as Chairman of a foreign bank. His friends believe such an appointment might jeopardize other City appointments. Keynes also has concerns about whether he would truly be in control or merely a figurehead.

25 June 1919

“On Monday I actually began writing a book about the economic condition of Europe, but may not persevere with it.”

14 August 1919

Keynes opens a trading account to begin speculating in the currency markets on his own behalf. He trades on high margin, initially making large profits.

August, September 1919

Keynes writes The Economic Consequences of Peace, castigating the allies for the punitive reparations they had imposed on Germany at the end of the war.

In one passage of the book he writes chillingly of what might be unleashed in Europe:

“If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not be limp. Nothing can then delay for very long that final Civil War between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victorious the civilization and progress of our generation.”

(The subsequent rise of Adolf Hitler in an economically desperate Germany is held by many observers to justify Keynes’s condemnation of the punitive actions taken by the allies against Germany following World War One.)

September 1919

Keynes accepts and invitation to join the Board of Directors of the National Mutual Life Insurance Company. (He will become chairman in 1921.)

December 1919

Keynes’s The Economic Consequences of Peace is published in Britain and in January it will be published in America. The left welcome the book. The centre and right are hostile – they believe it is right that German criminality should be punished. With time, this view will change to one of ‘I suppose this fellow is right; I suppose we have made a fearful hash of things.’

The book brings fame to Keynes but also turns him into a figure the establishment will be wary of for a considerable period of time.

May 1920

Keynes loses disastrously in his currency speculating. His brokers – treating Keynes more favourably than the norm – request £7,000 to keep the account open. Keynes is given £5,000 by a financier and obtains £1,500 in advance for future sales of The Economic Consequences of Peace.

July 1920

Keynes is back in the currency markets, speculating again – this time successfully. He wants to be independently wealthy – his authorship of The Economic Consequences of Peace – seen as an anti-establishment work – has ruined his chances of obtaining a position on the board of any of the great British banks.

November 1920

Keynes is appointed Second Bursar at King’s College with a stipend of £100 per year. As a Supernumerary Fellow, his academic activities are now unpaid.

1921

It is a busy year – and in fact it will be a busy decade – as Keynes juggles a multiplicity of jobs and responsibilities.

Friday to Tuesday each week Keynes is at King’s College, tutoring pupils, lecturing and presiding over his Monday evening club.

His bursarial duties grow and he takes increasing responsibility for the College’s investment policy.

He writes to the Cambridge Review, supporting the cause of women, and continues as Editor of the Economic Journal.

With a view to increasing his personal wealth, Keynes forms or joins a number of investment syndicates while continuing to speculate on his own behalf.

In London, he becomes a financial consultant and follows the markets daily.

He decides he will write a new book on the German reparations problem and has frequent correspondence with people connected with this issue.

Keynes is also writing frequently for newspapers, particularly the Manchester Guardian. He sells his articles overseas and earns a significant income from journalism.

He is a member of the Liberal Committee on Industrial Policy.

Meanwhile, he continues to be a main player with his Bloomsbury friends in London where the concerns revolve around the finer things in life – the arts, good conversation, gossip about friends, literature and parties.

Easter 1921

On vacation in Algeria and Tunisia, Keynes returns to his earlier dissertation on probability, preparing it for publication with the title Treatise on Probability.

In North Africa, he and a friend have their shoes polished by a street-boy. Keynes believes he knows how much the boy should be paid and refuses to pay more. Natives throw stones at Keynes as he makes his way from the scene. Keynes comments, “I will not be a party to debasing the currency.”

Later in 1921 Treatise on Probability is published. It is Keynes’s first and last major work in Mathematics, exploring the foundations of knowledge.

Keynes argues against the validity of probabilities based on the frequency of past occurrences where probabilities may be subject to interpretation by people. He argues that probability is a logical relation and so it is objective. A statement involving probability relations has a truth-value independent of people’s opinions. He says:

“Perception of probability, weight, and risk are all highly dependent on judgement,” and “the basis of our degrees of belief is part of our human outfit.”

May 1921

Keynes loves the Ballet and he begins to fall under the romantic spell of the well-known Russian ballerina, Lydia Lopokova. Lydia is separated from her husband, who lives in America. Keynes persuades Lydia to move to a flat closer to his Bloomsbury friends and begins to advise her financially.

January 1922

A Revision of the Treaty, Keynes’s second work on German reparations is published. The book documents the course of events since his previous work and argues again for a reduction in payments demanded from Germany.

1922

Keynes publishes his views – and those of many other distinguished authors – on Europe’s economies in twelve Manchester Guardian supplements. These run to 810 large three-column pages. Keynes argues for currency devaluation in all but a few European countries and a new Gold Standard.

1923

Keynes begins contributing monthly articles – mainly on reparations – to the Nation, the Liberal weekly. He also writes regular ‘Notes on Finance and Investment’ for the Nation.

7 July 1923

The Bank of England, amid falling prices and rising unemployment, increases the base rate from three to four percent in preparation for Sterling’s return to its pre-war gold parity.

14 July 1923

Referring to the increased interest rate, a horrified Keynes writes in the Nation: “The Bank of England acting under the influence of a narrow and obsolete doctrine has made a great mistake.”

November 1923

Keynes publishes A Tract on Monetary Reform, calling for an end to the Gold Standard, which he refers to as “a barbarous relic”. He states that devaluation is preferable to deflation. On the question of whether it is preferable to manage a currency to achieve a stable external value or stable internal prices, Keynes concludes that stable internal prices are preferrable.

12 April 1924

British unemployment has reached one million. Lloyd George writes to the Nation demanding the Government should intervene to fund a large program of public works to create jobs.

1924

Keynes become First Bursar at King’s College, taking control of the College’s finances.

24 May 1924

Keynes’s Does Unemployment Need a Drastic Remedy? is published in the Nation. He proposes Government capital spending of £100 million per annum to stimulate the economy, specifically spending on housing, roads and electrical power distribution. He further proposes National Savings should be spent on works in Britain rather than invested overseas.

Second Half 1924

Sterling is appreciating on the currency markets. Speculators are buying Sterling anticipating it will rise to its pre-war value when it rejoins the Gold Standard.

November 1924

Keynes gives the Sydney Ball Foundation Lecture at Cambridge. The title he chooses for his lecture is The End of Laissez-Faire and he says:

“I believe that in many cases the ideal size for the unit of control and organisation lies somewhere between the individual and the modern State. I suggest, therefore, that progress lies in the growth and the recognition of semi-autonomous bodies within the State-bodies whose criterion of action within their own field is solely the public good as they understand it, and from whose deliberations motives of private advantage are excluded…”

“One of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialise itself. A point arrives in the growth of a big institution… at which the owners of the capital, i.e. its shareholders, are almost entirely dissociated from the management, with the result that the direct personal interest of the latter in the making of great profit becomes quite secondary. When this stage is reached, the general stability and reputation of the institution are the more considered by the management than the maximum of profit for the shareholders.”

“We must aim at separating those services which are technically social from those which are technically individual… The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all.”

“For my part I think that capitalism, wisely managed, can probably be made more efficient for attaining economic ends than any alternative system yet in sight, but that in itself it is in many ways extremely objectionable. Our problem is to work out a social organisation which shall be as efficient as possible without offending our notions of a satisfactory way of life.”

December 1924

By virtue of astute speculation in the financial markets, Keynes’s assets have grown from nil (virtual bankruptcy) in May 1920 to £57,797. He has achieved his objective of becoming a wealthy man.

April 1925

Keynes, almost on his own, continues to argue against the Gold Standard. He writes in the Nation of his concerns about the over-valuation of Sterling.

29 April 1925

Winston Churchill, acting on the advice of his economic advisers, returns Sterling to the Gold Standard. Keynes continues to protest that Sterling is overvalued. (Churchill would later admit that rejoining the Gold Standard at the prewar level was one of the greatest mistakes he ever made.)

4 August 1925

Lydia Lopokova becomes Keynes’s wife and the married couple travel to Russia to meet Lydia’s family.

1925 – 1926

British coal exports become uncompetitive because of Sterling’s high value. Mine owners decide coal miner’s wages should be cut.

Stanley Baldwin’s Conservative government intervenes and provide a nine-month subsidy to maintain the miners’ wages.

February 1926

Keynes calls for a working agreement between the Liberal and Labour Parties in order to rid the country of the Conservative Government.

May 1926

A general strike in support of the miners causes widespread disruption. The aftermath of the strike is highly damaging and Britain’s industrial development between 1925 and 1929 lags most of its competitors.

Treatise on Money and the General Theory of Employment, Interest and Money – 1927 to 1939

Date

Event

1927

Keynes continues working in his academic and bursarial duties at King’s College, a variety of business roles and his editorial and journalistic activities. He takes a less prominent role in public life as he develops ideas and drafts his next major work – A Treatise on Money.

Summer 1929

Keynes is made Fellow of the British Academy.

October 1929

Led by Wall Street, the world’s stock markets crash, heralding an economic depression.

4 November 1929

Keynes joins the government’s Macmillan Committee of Enquiry into Finance and Industry.

30 January 1930

Keynes joins the Economic Advisory Council, set up to report to the government on economic policy.

10 May 1930

Keynes writes in the Nation:

“The fact is – a fact not yet recognized by the great public – that we are now in the depths of a very severe international slump, a slump which will take its place in history amongst the most acute ever experienced. It will require not merely passive movements of bank rates to lift us out of a depression of this order, but a very active and determined policy.”

A Treatise on Money is published in two volumes. The central thrust of the treatise is the distinction between Investment and Saving. If Investment exceeds Saving, there will be inflation Keynes says. If Saving exceeds Investment there will be recession. One implication of this is that, in the midst of an economic depression, the correct course of action should be to encourage spending and discourage saving. This runs contrary to the prevailing wisdom, which says that thrift is required in hard times. In Keynes’s words:

“For the engine which drives Enterprise is not Thrift, but Profit.”

May/June 1931

At the invitation of the University of Chicago, Keynes travels to America to give a lecture on the Harris foundation. His chief desire is to study America’s economic conditions at first hand. He has interviews with senior people in the Federal Reserve and with President Hoover. He his happy with the Federal Reserve’s attitude that it should promote economic expansion.

September 1931

The British Government, reeling from the depression, abandons the Gold Standard and devalues sterling by twenty percent. In doing so, it finally acts as Keynes has been advocating since the mid-1920s.

September 1931

Keynes attacks Ramsay MacDonald’s National Government’s budget – in particular the wage cut for school-teachers and the reduction in the road building and house building programmes. He warns the budget will cause both deflation and unemployment to worsen.

1932 / 1933

Keynes continues to advocate that the government should borrow money and undertake large-scale public works to stimulate the economy.

June 1933

The BBC broadcasts a transatlantic conversation between Keynes and Walter Lippmann – the first ever broadcast of a transatlantic conversation.

17 April 1934

Walter Lippman writes to Keynes from America about the effect a letter from Keynes to the New York Times has had:

“…I do not know whether you realize how great an effect that letter [viz. that in the New York Times] had, but I am told that it was chiefly responsible for the policy which the Treasury is now quietly but effectively pursuing… reducing the long-term rate of interest.”

June 1934

Keynes visits America again. He studies its economy and its stocks and bonds for personal investment purposes. He concludes that share prices – particularly of public utilities – are priced for exceptional value and he invests a large part of his own funds – with great success.

He meets President Roosevelt who writes to Felix Frankfurter, “I had a grand talk with K and liked him immensely…”

Keynes wins the enmity of American advocates of laissez-faire economics who believe Roosevelt is allowing American economic policy – The New Deal – to be influenced by a foreign economist.

Late 1934

Keynes finishes writing his first draft of The General Theory of Employment, Interest and Money – an analysis of the causes of unemployment. Keynes argues against the classical economic theory that full employment could always be reached by making wages sufficiently low.

January 1935

In a letter to George Bernard Shaw, Keynes writes:

“… you have to know that I believe myself to be writing a book on economic theory which will largely revolutionize – not, I suppose, at once but in the course of the next ten years – the way the world thinks about economic problems.”

Early 1935

Keynes sends copies of the first draft of The General Theory of Employment, Interest and Money to a variety of figures whose views he respects and engages in a significant amount of detailed correspondence with these people as he works to perfect the book. In a letter to George Bernard Shaw, Keynes writes:

“The city of Cambridge has always lacked a first class theatre. Keynes, as First Bursar of King’s College, releases land for the construction of a theatre and funds much of the construction personally.”

June 1935

Copies of the second draft are sent out, again resulting in vigorous correspondence.

February 1936

The General Theory of Employment, Interest and Money is published. Keynes proposes that economies are made up of aggregate quantities of output resulting from aggregate streams of expenditure – unemployment is caused if people don’t spend enough money.

1936

As Hitler’s Germany grows ever more menacing Keynes who, in the 1920s, had favoured disarmament, speaks and writes in favour of a militarily strong Britain.

He travels to Russia and to Europe and continues with his normal duties.

Summer 1937

Keynes suffers life-threatening illness, with thrombosis of the coronary artery. He moves to Ruthin Castle in Wales for rest and reduces his workload dramatically.

February 1938

Keynes makes his first public appearance since he fell ill, at the Annual General Meeting of the National Mutual Life Assurance Society.

October 1938

In an article in the New Statesman, Keynes writes of the Munich agreement between Neville Chamberlain and Adolf Hitler:

“Neither the Prime Minister nor Herr Hitler ever intended for one moment that the play-acting should devolve into reality.”

The War Years America, Lend-Lease, the IMF, and a Peerage -1939 to 1945

Date

Event

September 1939

Germany invades Poland and Britain declares war on Germany. World War Two has begun. Keynes, although continuing to suffer ill health, resumes his work in Cambridge and London.

October 1939

Keynes attacks the attitude of the intellectual Left to the war, writing in The Times:

“The intelligentsia of the Left were the loudest in demanding that the Nazi aggression should be resisted at all costs. When it comes to a showdown, scarce four weeks have passed before they remember that they are pacifists and write defeatist letters to your columns, leaving the defence of freedom and civilization to Colonel Blimp and the Old School Tie, for whom Three Cheers.”

November 1939

Party politics have more or less ceased and Keynes is offered the (likely to be uncontested) position of Member of Parliament for Cambridge University. He turns this honour down, in order that he can remain aloof from government and take his own individual stance on issues.

February 1940

Keynes publishes a small book entitled How to Pay for the War, which sells 35,000 copies. He actively promotes his proposals that interest rates should be kept low and that compulsory saving (deferred pay) should be used as a mechanism to prevent the inflation that occurred during World War One.

7 June 1940

Keynes’s doctor says he is now, “fit for any moderate activity.”

July 1940

Enemy aliens are rounded up and sent to the Isle of Man, including a number of academics who have fled Nazi Germany. They will later be released but meanwhile Keynes writes, “I can remember nothing equal to what is going on for stupidity and callousness.” He writes a stream of letters to various authorities on behalf of internees.

Keynes is given a room in the Treasury and becomes a government economic adviser. He receives no pay for his duties, but now spends most of his time in London in this capacity.

September 1940

A German bomb falling on London smashes windows in Keynes’s house and there’s an unexploded bomb in the neighbourhood. Keynes commutes into London for three weeks from his Tilton vacation home.

May 1941

Keynes makes the first of several very important visits he will make to America between now and 1946. The good personal relationships he has developed in past visits to America – and he will continue to develop – will make it easier for Keynes to negotiate with America on Britain’s behalf. On this occasion, Keynes is concerned mainly with arrangements for Lend-Lease and to explain in detail Britain’s financial predicament after two years of war.

29 May 1941

Anthony Eden makes an important speech on Britain’s war objectives – the economic thrust of which is based on Keynes’s ideas.

October 1941

Keynes is elected to the Court of the Bank of England.

He has grave concerns for Britain’s post-war economy and wonders about the possibility of applying “Keynesian” solutions on a world-scale. He writes his first draft of an international ‘Clearing Union’ of a non-political character, to aid and support other international institutions concerned with the planning and regulation of the world’s economic life.

1942 – 1944

Keynes is heavily engaged in making proposals for and engaging in discussions about what will later become the International Monetary fund (IMF), the World Bank, and the Breton Woods system for international currency management.

1942

Keynes gives his broad support to proposals from Sir William Beveridge for a large-scale expansion of social insurance – later to be called the welfare state and the National Health Service. Keynes is confident the proposals are affordable but persuades Beveridge to cut down on overall costs in the first five years. This results in a postponement of the right to higher pensions until contributions had been accumulated.

May 1942

Manchester University makes Keynes an Honorary Doctor of Laws.

June 1942

Keynes is awarded a peerage, bringing him a seat in the House of Lords. His title is Baron Keynes of Tilton. He chooses to take a seat with the Liberal Party in the Lords.

September 1943

Keynes makes his second wartime visit to the United States, refusing to be deterred by his poor health. He meets Harry Dexter White, Chief International Economist at the U.S. Treasury, who he will cross swords with frequently on the post-war economic settlement. (Harry Dexter White will later be exposed as a Soviet agent.) Whatever Keynes’s abilities as a negotiator, Britain’s weak economic position means that America holds the trump cards in most negotiations. Nevertheless, close co-operation between the British and Americans on economic matters is established and Keynes manages to shift White’s position closer to his own in many important respects.

March 1944

Illness prevents Keynes attending an important series of economic meetings with the Dominions – Australia, Canada and New Zealand.

June 1944

Keynes sets sail for Bretton Woods for further talks with American negotiators about the post-war economic settlement. In his journal, one of the British contingent at the talks, Professor Robbins, writes:

“In the late afternoon we had a joint session with the Americans, at which Keynes expounded our views on the Bank. This went very will indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.”

July 1944

Emmanual Goldenweiser writes of Keynes’s chairmanship of the Bank Commission:

“He shone in two respects – in the fact that he is, of course, one of the brightest lights of mankind… and also by being the world’s worst chairman.”

Dean Acheson, America’s representative tells the Treasury Secretary that Keynes was rushing things, “in a perfectly impossible and outrageous way… He knows this thing inside out so that when anybody says section 15-C he knows what it is. Nobody else in the room knows. So before you have an opportunity to turn to Section 15-C and see what he is talking about, he says, ‘I hear no objection to that’, and it is passed. Well, everybody is trying to find 15-C. He then says, we are talking about Section 26-D. Then they begin fiddling around with their papers, and before you find that, it is passed.”

Keynes suffers a heart attack while in the United States, but it does not seem too serious.

September – November 1944

The cost of fighting the war has pushed Britain’s external debt to enormous levels. Anticipating the defeat of Germany, Keynes travels to the United States for a fourth time, to negotiate Lend-Lease for the war against Japan after Germany’s defeat. He spends over two months in Washington, taking every opportunity to describe Britain’s dire financial position to the Americans.

August 1945

Churchill has been replaced by Atlee and Roosevelt is dead, replaced by Truman. The bomb has been dropped on Hiroshima. Keynes is deeply engaged in negotiations with the Americans again. Fighting the war for six years has bankrupted Britain. Keynes is engaged in the task of eliciting American assistance to keep Britain solvent in the post-war years, when the Americans may feel less well disposed to helping a country it is no longer fighting shoulder-to-shoulder with.

America announces that Lend-Lease to the United Kingdom has been stopped. Mainstream American opinion is that, with the war over, if the British are not starving, they should not need further assistance.

Keynes will need to fight hard to secure further American assistance for Britain.

After the War The World Bank, the IMF, and the End – 1945 to 1946

Date

Event

September 1945 to December 1945

Keynes travels to the United States again, hoping to secure a loan to help Britain rebuild its economy. If he does not succeed, food rations in Britain will have to be cut severely.

Keynes speaks at the Federal Reserve for three days, presenting facts without embellishment. All present agree it is the finest presentation of a case they have ever heard.

Members of the British and American delegation break into separate commissions to discuss individual problems – over a period of three months.

The British obtain a loan from America, which will be interest free for six years and then charged at two percent. Also, Britain’s huge potential Lend-Lease obligations to America will be remitted in their entirety. It is likely that Keynes’s efforts for Britain have been rewarded with more generous terms than might have been obtained otherwise.

December 1945

Keynes returns to Britain, his health poor with fatigue, to find a significant degree of malcontent with the loan agreement he has negotiated with America. In Parliament and in the country at large there is a growing anti-American feeling, spurred by the belief that Britain is being forced into too many concessions to America in order to obtain the loan.

Unfortunately, most people are not acquainted with the economic facts. Keynes gives a masterful performance in the House of Lords, explaining the terms of the loan agreement and how Britain could not reasonably expect more.

February 1946

Keynes finds time to return to Cambridge and to dine amongst friends in his old Monday Evening Club.

20 February 1946

Keynes suffers a slight heart attack while visiting the ballet at Covent Garden.

24 February 1946

Keynes sets sail for New York, from where he travels to Savannah, Georgia for what will prove to be his final visit to the United States. He anticipates a pleasant time at the inaugural meetings of the World Bank and the International Monetary Fund and plans to enjoy a vacation afterwards in Savannah, a place he has previously found to be highly agreeable.

In fact, the meeting proves to be difficult and ill-tempered. In Keynes’s view, the Americans are taking advantage of their strong economic position to force ill-conceived decisions on the IMF and Bank. Nations in debt to the Americans are voting with America, not because they want to but because, owing to their dependence on American aid, they feel they have no other option.

Until now, Keynes has always spoken strongly in favour of Americans – he has always found them to be pragmatic, ready to look at issues from all angles and ready to compromise. Now it seems they merely wish to dictate. When the meeting is over, Keynes abandons his plans for a vacation in Savannah. The place now has bitter associations and, on March 18 he leaves on the night train for Washington.

19 March 1946

On the train to Washington Keynes suffers a severe heart attack.

11 April 1946

Over lunch at the Bank of England, Keynes tells Henry Clay of his hopes that Adam Smith’s ‘invisible hand’ can help Britain out of the economic hole it is in:

“I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”

21 April 1946

John Maynard Keynes dies at home, in bed.

22 April 1946

The Times obituary writes of Keynes:

“To find an economist of comparable influence, one would have to go back to Adam Smith.”